The traditional methods of performance appraisal, discussed above, suffer from major limitations for their obvious emphasis on assessing individual performance or task, considering it as an isolated factor.
To eliminate such narrow and partial approach, the newer techniques of performance appraisal have been developed and are widely practised by the organizations, particularly for managerial and supervisory employees.
Some of the modern techniques are discussed below:
1. Appraisal by Results for Management by Objectives:
Management by objective (MBO) is a comprehensive management approach which is adopted for performance appraisals and so also for organizational development.
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When MBO is used for performance appraisal only, its primary focus is on developing objective criteria for evaluating the performance of the individuals. Identification of common goals is jointly done by the superior and subordinate managers of an organization. After such identification, each individual’s major areas of responsibilities are defined. Such defined responsibility becomes the basis for evaluating the performance of an individual employee.
Most of the organizations put emphasis on developing KRA’s through MBO exercise, since this approach necessitates joint meeting of the supervisor and the employee to define, establish and set goals or objectives, which the individual employees would achieve, within a prescribed time limit (mostly it is the form of early targets). Such an exercise also establishes ways and methods to measure performance.
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Goals are mostly work related and career oriented and are integrated with overall organizational objectives. Periodic evaluations of employees’ performances are done in terms of goals, and if required, goals may be revised. MBO also calls for superior-subordinate interaction and supportive role of the supervisor, which, as well, includes counselling or coaching.
However, an MBO system lays more stress on tangible goals and hence, intangible goals like morale, good interpersonal relations, commitment to the job, etc., are often ignored. Moreover, MBO exercise is both time consuming and money consuming.
2. Assessment Centre Method:
This method is to test candidates in a social situation by a number of assessors, using a variety of criteria (which may be a paper pencil test, interviews, in-basket exercise, business game, role playing incident or a leaderless discussion). The assessors or evaluators are drawn from experienced executives, working at different levels of management.
Under this method, performances of employees are evaluated both individually and collectively. This method is useful in measuring interpersonal skills, organizing and planning ability, creativity, resistance to stress, work motivation, decision-making power, etc.
3. Human Asset Accounting Method:
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This method attaches money estimates in the value of manpower of ah organization. The process is somewhat like estimating the goodwill value and can be appraised by developing a procedure to undertake periodic measurement of certain variables. Such variables are either categorized as key variables or intervening variables. Key variables are policies and decisions of an organization, its leadership strategies, skills and behaviour of an employee, etc.
Intervening variables are loyalties, attitudes, motivations, interpersonal relations, communication and decision making. Measuring such variables over several years, the quantification of human assets is difficult for the obvious problem in developing the accounting procedure. It is not a very popular method of performance appraisal.
This system is more appropriately used for evaluating the collective performance of an organization, rather than the individual appraisal of an employee. This method is useful for organizational development, as it helps in identifying the changed areas more scientifically than any other method.
4. Behaviourally Anchored Rating Scales (BARS):
This method helps in measuring and improving job performance more accurately. For each performance area, some standard statements are provided. These are then put on the scales in BARS. While developing such BARS, group discussions are conducted to identify significant job dimensions that need to be evaluated. BARS may be of different types for different job dimensions. Normally, BARS are presented vertically with scale points ranging from five to nine.
Due to its behavioural orientation, it is considered as the most useful techniques of performance appraisal. Moreover, this system provides opportunity to both appraise and appraiser to interact and participate in developing standards for each performance area. However, despite all these advantages, organizations try to avoid this method of appraisal because of its time-consuming and painstaking process.
5. 360 Degree Appraisals:
This appraisal method is now largely in use throughout the world. It requires performance feedback from all important stakeholders of the organization like the appraise himself, his superiors, peers, other team members, customers and suppliers.
Apart from its effectiveness in reporting performance, this method also ensures total employee involvement (TEI) and employee empowerment. This method also reduces subjective evaluation system in an organization.
6. Potential Appraisal:
Potential appraisal is a holistic approach for studying wholesome qualities of an employee with a given intellect, personality and character. Industry practices apply two widely used approaches for potential appraisal, i.e., helicopter and whole person qualities. Helicopter method tries to measure the potentiality of a person on large, as well as, on specific issues.
Whole person qualities method measures the wholesome qualities/potentialities of a person with a given set of variables, mentioned above, which are already determined for the person. Potential appraisal data is extremely useful for career planning, as the latent abilities of an individual can be captured and matched with the future role and responsibilities. However, in India, we do not have documented practices on potential appraisal in the corporate world.